Outsourcing and Insourcing Crime: The Political Economy of Globalized Criminal Activity

Article excerpt

This Article presents a novel theory of the political economy of transnational crime control, answering three consecutive questions. First, why does crime travel across national borders? The Article demonstrates that in the globalized economy, profit-driven crime (e.g., money laundering, drug trafficking, gaming, and the sex trade) responds-much like legitimate economic activity-to local regulation by shifting to the territorial jurisdictions in which it incurs lower expected sanctions, making it most profitable for criminals. Second, how do governments react to the international mobility of criminal activity? The Article argues that the crime control policies adopted by individual states influence the global distribution of transnational crime, and that they subsequently influence the crime control policies adopted by other states. More specifically, it demonstrates how, in a dynamic setting, states engage in two types of regulatory crime control "races," depending on differential national attitudes towards the activity involved. The first is the outsourcing race, in which increasingly strict policies cause crime to shift to other states. The second is the insourcing race, in which increasingly lenient policies attract crime to the state. In each of these races, states impose externalities upon each other, and inefficient levels of both enforcement and crime arise, in what may be seen as a global collective action problem. Finally, how should global crime control be designed to enhance global welfare? Building on theories of public choice and international relations, the Article offers a critique of existing policies in the area and explores innovative crime control policies.

If displacement is happening then I would say that's all the more reason why other areas should take on this model. Let's drive people out to Lincolnshire and into the sea.

- Alan Given, Chief Executive of the Crime and Drugs Partnership1

I. INTRODUCTION

Globalization is on the rise. The last few decades have been marked by dramatic reductions in transaction costs that have helped bring together local markets. Technological advances such as wireless telecommunications and the Internet have connected buyers and sellers of goods and services across the planet through transactions that were not even feasible, let alone cost-effective, as little as a decade ago. No less importantly, the systematic removal of regulatory barriers to international trade has facilitated economic globalization. At the forefront of international economic liberalization, the creation of the World Trade Organization ("WTO")2 in 1995 extended multilateral trading rules beyond trade in goods to cover transnational provision of services, protection of intellectual property rights, and technical and health-related standards.3 Hundreds of Regional Trade Agreements ("RTAs") that further reduce barriers4 are complemented by an even greater number of international investment protection agreements called Bilateral Investment Treaties ("BITs").5

In the shadow of these economic developments, the same period has also witnessed the rise of transnational crime (roughly defined as serious crime whose perpetration and effects occur in more than one state)6 as a source of grave concern around the globe.7 Drug smuggling, arms trading, human trafficking, illegal sex trade, money laundering, wholesale intellectual property rights infringement these and other illicit activities8 have flourished due to the advances of technology and the freer movement of goods, services, money, and people that characterize the modern world, just as legal international business transactions have flourished. There are, no doubt, direct links between technological progress and economic liberalization, on the one hand, and the growth of transnational crime and the accompanying anxiety, on the other hand. For example, illegal child pornography became easier to distribute via the Internet,9 and the removal of barriers to international trade in goods and the free flow of funds may have facilitated cross-border trafficking in illicit drugs. …